In brief
On 9 July 2026 His Honour Judge Baumgartner delivered his judgment, dismissing all criminal charges brought by the CPS against Hauser & Wirth ("H&W"), an art gallery, and Artay Rauchwerger Solomons ("ARS"), a fine art logistics company, for their part in the sale and supply of a painting “Escape from Humanity” by the American contemporary artist George Condo (the "artwork") to Alexander Popov, a person alleged to be connected to Russia.
- The Court held that, whilst the art work had been "made available" to Popov, the defendants had not breached sanctions as he was not ordinarily resident in Russia.
- The case demonstrates the challenges in prosecuting alleged sanctions breaches and the wider implications for the art and luxury goods market.
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Background
H&W and ARS were charged with offences contrary to reg. 46B(2)(b) and reg. 46B(4) of The Russia (Sanctions) (EU Exit) Regulations 2019 (the "Regulations"), namely making the artwork, a "luxury good", available to Popov through its sale in July 2021 (invoiced in October 2021) and consigning it to Popov as a person alleged to be "connected with Russia". Delivery of the artwork did not in fact come to fruition as the UK Border Force seized the artwork on 8 September 2022 before it left the UK.
Legal representatives of H&W and ARS made pre-trial submissions to HHJ Baumgartner that there was insufficient evidence on which a jury could properly convict, on two key legal requirements of the Regulations, namely:
- Neither H&W nor ARS had made the artwork "available" to Popov within the meaning of the Regulations; and/or
- Popov was not "ordinarily resident" in Russia.
Legal framework
Regulation 46B(1) prohibits the export of luxury goods to, or for the use in, Russia.
Regulation 46B(2) provides that:
"A person must not directly or indirectly—
- supply or deliver luxury goods from a third country to a place
in Russia;
- make luxury goods available to a person connected with
- Russia.
- make luxury goods available for use in Russia."
Regulation 21(2) defines someone as being connected with Russia if (emphasis added) that individual is:
- "an individual who is, or an association or combination of individuals who are, ordinarily resident in Russia,
- an individual who is, or an association or combination of individuals who are, located in Russia,…"
The decision
In dismissing the charges, the judge found that, on the first ground, both the gallery and the logistics company had "made available" the artwork to Popov. The judge agreed that the mere passing of title did not satisfy the requirement of making available. However, when taken with the subsequent actions of payment, constructive possession and release to the logistics chain directed by Popov, the artwork had been made available to him.
The tipping point for the judge however was the outcome of the factual analysis surrounding Mr Popov's "ordinary residence", where he drew upon case law from other areas, such as UK tax, in arriving at his decision to dismiss.
Notwithstanding the fact that before the February 2022 Russian invasion of Ukraine, Popov's address was recorded as Moscow, Russia, he held Russian nationality, business interests and assets in Russia and familial ties in the country, the judge found that these only demonstrated a "continuing connection" with Russia and not residence.
There were a number of factors which pointed away from Russia as the place of "ordinary residence", including:
- The property to which the H&W invoice was addressed was subsequently rented out.
- Popov had attempted to renounce his Russian citizenship, although this was rejected.
- Popov had travelled to Bosnia and Herzegovina where he received a registration card, taxpayer reference and commenced the citizenship process.
- Leasing of properties in Italy and Bosnia and Herzegovina by Popov.
- Artwork belonging to Popov had been transferred out of Russia to countries where he had entered into agreements for its storage.
As far as dual residence was concerned, it could not be excluded as a matter of law, as it was possible to have an "ordinary residence" in more than one place, but this was not made out on the facts of the present case.
Implications
This case highlights the increasing expectations placed on those who deal in art and luxury goods with regards to client checks and scrutiny. Within the context of developing and maintaining client relationships, those involved are now having to interpret nuanced factual backgrounds to assess whether or not they can proceed to do business. Failing to do so clearly creates too great an exposure-reputationally, legally and economically.
Detailed consideration of the sanctions position runs in parallel to art market participants' continuing obligations under the anti-money laundering regulations which themselves have been more actively enforced over the last year. The commentary has always been that the art market is unregulated. However, aside from operating within a framework of national and international laws, these regulations and the AML regulations are illustrative of the constraints around businesses operating in this sector. The parties involved in this particular case are both known and large, international operations. However it is of note that a uniform approach to administration of regulations makes it increasingly difficult for emerging and smaller practitioners operating in the sector.
This represents the first corporate prosecution under the Regulations, with HMRC leading the enforcement of sanctions as far as goods and services moving in and out of the UK is concerned. As such, this defeat delivers a significant blow to HMRC's enforcement objectives, in an environment where there is increasing pressure for sanctions and tax evasion to be reduced and for the Treasury to recover evaded sums.
On first reflection, the judgment is heavily fact specific, but this only highlights the importance in criminal proceedings, especially when dealing with novel concepts such as sanctions enforcement, of properly considering at an early stage a client's case against the relevant legal requirements.